Apple's big year outshines mixed result for Silicon Valley

The phenomenal performance of a single superstar overshadowed an otherwise mixed year for Silicon Valley's 150 biggest companies in 2011, as Apple (AAPL) surged past Hewlett-Packard (HPQ) to become the valley's dominant financial powerhouse.

Apple's ascendance in the SV150 marked a sea change for the Silicon Valley tech industry: The company's popular iPhones and iPads are revolutionizing the way consumers and workers share information around the world, prompting analysts at Barclays Capital to call Apple "the most disruptive force in tech."

With nearly $128 billion in annual sales, Apple became the valley's biggest company by revenue for the first time in 2011. That distinction was previously held by HP in every year since this newspaper began ranking local companies in 1986.

Apple also ranked first for net income, racking up a mind-boggling profit of nearly $33 billion. Essentially, Apple accounted for $1 of every $5 in sales reported by the SV150 as a whole, and nearly $1 of every $3 in combined SV150 profit.

And as its stock price blew past $600 a share in March, Apple ended last month with a market capitalization of $558 billion. That was nearly a third of the market cap for the combined SV150. And although its stock dipped slightly this month, it is still the most valuable company in the world.

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Longtime tech leader HP, meanwhile, saw its revenue, profit and stock value sink under the combined weight of internal upheaval and external pressures, including market shifts in the PC and printer business that Apple's sleek, handheld gadgets helped instigate.

The rest of Silicon Valley responded unevenly to those shifts and related trends -- such as the explosive growth of social networking, cloud computing and "big data" -- while coping with a sluggish economic recovery in the United States, financial turmoil in Europe and a double whammy of natural disasters in Asia.

"2011 really was a mixed bag, with some segments of the tech industry performing really well and others not so well, particularly in comparison to the year before," said Stephen Minton, who tracks tech spending for research firm IDC.

Silicon Valley's big winners last year included consumer technology and Internet businesses. Results varied for other sectors.

Consider: While combined sales for the valley's 150 biggest public companies rose 17.5 percent last year, one in four of those companies saw their revenue fall in 2011. By contrast, only one in eight companies reported sales declines in 2010, when tech spending came roaring back from the recent recession.

And while the SV150's combined profit rose 22 percent last year, almost half the companies on the list reported a profit decline. That's nearly three times the number reporting profit declines in 2010.

Forty-six companies, or nearly a third of the SV150, reported a net loss, up from 34 in 2010.

HP, which has a workforce nearly six times Apple's, has accounted for a similar or larger share of the SV150's sales in the past. Only once in recent years, however, has it also matched Apple's share of SV150 profit. That was in 2008.

Apple's 31 percent share of this year's SV150 total market capitalization has never been matched, even by HP, in the 26 years this newspaper has compiled statistics. While the combined SV150's market cap rose 16 percent, to $1.8 trillion, Apple's stock value rose 74 percent.

Aside from Apple, much of the valley struggled in 2011 with an on-again, off-again global economy. The year started strong, after a record-setting 2010, as tech spending bounced back from the Great Recession of 2008 and 2009. But then the debt crisis worsened in Europe, and U.S. lawmakers seemed unable to resolve a deficit standoff.

"That had an impact on European tech buyers, and also on U.S. buyers," said analyst Andrew Bartels at the Forrester Research firm. "The feeling was, 'I'm not sure what's happening here, so I'm going to slow down.' "

Tech spending picked up eventually, but other factors took their toll. While the industry recovered from the Japanese tsunami in March, companies reeled from last fall's flooding in Thailand, where most disk drives are made. A shortage of those crucial components disrupted sales of PCs and servers, forcing chip giant Intel to lower its revenue projections by $1 billion.

Except for tablets and smartphones, analysts said, spending on computer hardware stayed relatively flat in 2011, after a post-recession spike in 2010 when buyers replaced long-outdated machines. Commercial software sales were stronger in 2011, as businesses began the more expensive process of replacing programs that run their operations.

Some companies benefited from increased adoption of new technologies like virtualization, analytics and cloud computing. Those trends boosted sales for software makers like VMware, whose virtualization programs increase hardware efficiency; Tibco, which makes products that help businesses find patterns in mountains of data; and Salesforce.com, whose software is delivered over the Internet rather than installed on customers' computers.

The boom in mobile computing was good for giants like Apple and Google, which makes Android mobile software, along with companies that produce GPS sensors and wireless technology.

Analysts say people are increasingly using Apple or Android devices instead of PCs and printers to store and view documents, photos and other digital material online. Apple's iPad, initially viewed as a consumer product, is turning up in businesses, too.

Although HP is still the world's biggest PC company, the Canalys research firm estimated Apple sold 20.5 million Macs and iPads in the last quarter of 2011, compared with 15.3 million PCs sold by HP.

Apple's gadgets contributed to slowing PC sales last year, Barclays analysts concluded in a recent report. They added: "Apple seems to be only increasing its role as a disruptive force in the tech sector."

Jack Davis analyzed data for this report. Contact Brandon Bailey at 408-920-5022; follow him at Twitter.com/brandonbailey.